A new whitepaper from Visa and Allium highlights the rapid growth of onchain credit markets, which have facilitated $670 billion in stablecoin loans since 2020, with $51.7 billion in volume recorded in August 2025 alone. This resurgence follows a challenging period marked by the collapses of FTX and Terra Luna between 2022 and 2024. The report underscores increasing institutional adoption, with 81,000 monthly active borrowers and an average loan size of $121,000, signaling a shift toward larger-scale, sophisticated market participation.

The Evolution of Onchain Lending

Onchain credit markets operate on blockchain networks, utilizing smart contracts to automate lending processes, enforce loan terms, and manage collateral. This model replaces traditional credit checks with code, enabling trustless, transparent, and efficient borrowing and lending. The $670 billion in stablecoin loans reflects the appeal of stablecoins like USDC and USDT, which mitigate cryptocurrency volatility and provide stability for transactions. The sector’s recovery in 2025 demonstrates improved protocols and growing confidence after earlier setbacks.

Market Dynamics and Key Players

Lending activity is highly concentrated, with Aave and Compound accounting for 89% of total volume. These platforms dominate due to their robust infrastructure and high liquidity, offering users efficient borrowing and lending mechanisms. However, new protocols like Morpho Labs, which captured a 4% market share after its V2 launch, are introducing competition and innovation. The underlying collateral is similarly concentrated, with USDC and USDT representing over 98% of the stablecoin supply, highlighting both stability and potential risks.

Institutional Adoption and Market Trend

The average loan size of $121,000 and 81,000 monthly active borrowers indicate a shift from retail to institutional participation. Large-scale borrowers, including hedge funds and fintechs, are drawn to the efficiency and transparency of onchain lending. Smart contracts automate collateral monitoring and liquidations, reducing counterparty risk and operational costs. This presents an opportunity for banks and fintechs to integrate decentralized lending, streamlining operations and expanding credit access.

Challenges and Opportunities

The concentration of volume in a few platforms and stablecoins poses potential vulnerabilities, such as systemic risks if a major protocol or stablecoin faces issues. Regulatory uncertainty and smart contract vulnerabilities also present challenges. However, onchain lending offers a blueprint for a more inclusive financial system, enabling global peer-to-peer lending and democratizing credit access. Continued innovation, as seen with Morpho Labs, will drive competition and resilience.

Read More:
https://corporate.visa.com/content/dam/VCOM/corporate/solutions/documents/stablecoins-beyond-payments-onchain-lending-opportunity.pdf